Nautilus Minerals Inc., seeking to be the first large-scale miner of copper and gold from the ocean floor, is in talks with potential partners to sell a stake in the project off the coast of Papua New Guinea.Nautilus may sell shares to help raise $100 million if it can’t find a partner for the project 1,600 meters (5,250 feet) deep in the Bismarck Sea, where the Toronto-based company plans to start production in 2014, said Chief Executive Officer Stephen Rogers.“We’ve had discussions and continue discussions with a number of parties,” Rogers said in a telephone interview from Brisbane, Australia. “There are a lot of people interested in what we are doing, interested in this potential new frontier for the metals sector.”

Nautilus is exploring underwater for metals as rising demand in the past 10 years pushed up prices, while conventional miners battle increasing costs. The average industry cost to produce a pound of copper climbed 30 percent to $1.30 last year, according to data compiled by Bloomberg.

“Land-based grades are getting thinner, costs are obviously going up as a result of that, and of course we are now having to push into more pristine wilderness areas to find these metals,” Rogers said. “There are some benefits offered up by looking at the oceans as a potential source of minerals in the future.”

Nautilus’s biggest shareholders are Moscow-based Metalloinvest Holding Ltd., which owned 21 percent of the company’s shares as of May 1, London-based Anglo American Plc, and MB Holding Company LLC, according to data compiled by Bloomberg.

The $100 million figure doesn’t include the funds that Nautilus still needs to pay for the vessel that will be used at the project, Solwara 1. The company said on June 1 that there may be a delay in finalizing the financing amid tighter banking rules in Europe and a “depressed” shipping market. Germany’s Harren & Partner is building the vessel and will own 50.01 percent after it’s delivered.

“We still have to get our vessel program back on track, but we have a way of doing that, we’re not uncomfortable with that situation,” Rogers said in the Aug. 24 interview. The company may arrange a type of ship mortgage, he said.

Nautilus also is seeking an “amicable” solution before full arbitration begins in a dispute with the Papua New Guinea government, which owns 30 percent of the project, Rogers said.

The government agreed in March 2011 to exercise an option to buy a 30 percent stake in Solwara 1. The pact included an agreement that Papua New Guinea pay 30 percent of the funds Nautilus had already spent, as well as its share of development costs going forward.

Nautilus said June 1 the government asserted the company had not met certain obligations required for the March 2011 agreement to be completed, and an arbitrator in the dispute was named last month.

Nautilus fell 1.8 percent to C$1.31 at 2:13 p.m. in Toronto, bringing its decline this year to 27 percent.

Rogers said he’s still hoping to reach an agreement with the government before the arbitration begins.

“We’ve had representation in PNG for the last few weeks and we’re doing everything we can to resolve this amicably with the state,” he said.

Rogers declined to comment on the specifics of the dispute, other that the disagreement is “purely commercial.” The arbitration process may last about three to four months, Rogers said.

Nautilus was awarded the world’s first deep-sea mining lease by the government of Papua New Guinea in January 2011. The company is developing a production system using technology adapted from the offshore oil and gas industry. It will cut and gather ore from the sea floor and pump it to the vessel, where it will be processed and transferred to barges for transport and further processing.

The company already is building the seafloor production equipment, which was about 50 percent complete at the end of June, Rogers said.

Chinese copper smelter operators are probably the most likely partners for Nautilus, Raymond Goldie, a Toronto-based analyst at Salman Partners Inc., said in a phone interview. Nautilus said April 23 it agreed to sell 1.1 million tons a year of materials from Solwara 1 for three years to China’s Tongling Nonferrous Metals Group Co.

“It most likely would be someone that owns a copper smelter that’s getting hungry for feedstock, and the usual suspects in that area are the Chinese,” Goldie said. “Perhaps Tongling or a similar company might like to buy part of the project, as well as agreeing to buy product from them.”

Nautilus had $87.1 million in cash as of June 30 and raised C$34 million ($34.3 million) in an equity offering this month. The total capital cost of the Solwara 1 project, excluding the vessel, is expected to be $407 million, Rogers said.

Nautilus’s future financing needs will depend on whether or not the Papua New Guinea government pays its share of the costs under the March 2011 agreement, Goldie said.

The company has enough cash to continue work on the project for now, Rogers said.

“We have a good solid cash position today to allow us to continue with the current burn rate and the current progress rate on the project,” he said.